The UK tax authority confiscated three Non-Fungible Tokens (NFT). As part of an investigation into a suspected VAT fraud involving 250 alleged bogus firms.
Three persons are behind the bars on suspicion of attempting to defraud HMRC for £1.4 million, according to HMRC.
The authority claimed it was the first law enforcement agency in the United Kingdom to seize an NFT.
NFTs are digital assets that may be bought and traded but do not have a physical form of their own.
Digital tokens, which first appeared in 2014, are certificates of ownership for virtual or physical goods. NFTs contain a unique digital signature. It lets you trade and purchases them with either traditional or cryptocurrencies, such as Bitcoin.
Despite Bitcoin’s acclaim as a digital alternative to cash, NFTs have been considered a digital alternative to collectibles. But many skeptics believe they are a bubble waiting to burst.
Phony and stolen identities, false addresses, prepaid unregistered mobile phones, Virtual Private Networks (VPNs), false invoices, and pretending to engage in legal commercial activities, according to HMRC.
The first seizure of an NFT “serves as a caution to anyone who thinks they can use crypto assets to hide money from HMRC,” said Nick Sharp, deputy director of economic crime.
“We’re always adapting to new technology. This is to make sure we’re keeping up with how criminals and tax evaders try to hide their assets.”
HMRC said it has obtained a court order to keep the confiscated crypto assets. Estimated at around £5,000, and three digital artwork NFTs, in custody while its investigation continues.
What is NFT and how does it work?
Traditional works of art, such as paintings, have great value. As they are one-of-a-kind, whereas digital files may be simply and indefinitely replicated.
Artwork can be “tokenized” with NFTs to generate a digital certificate of ownership that can be purchased and sold. The tokens are to represent a variety of real-world items, including artwork, music, and films.
A shared ledger stores a record of who owns what, similar to crypto-currency, known as the blockchain.
As thousands of computers all around the world maintain the ledger, it is not possible to fabricate the records.
In September of last year, the selling price of an NFT of a popular online meme showing two-year-old Chloe Clem was nearly $74,000 (£54,000).